Why Has a US Court Blocked Donald Trump’s Tariffs – and Can He Get Around It?

Economic

Summary:

Challenge to president’s policies raises questions about his trade and economic plans

Donald Trump is facing the biggest challenge yet to his trade policies after a US federal court ruled that his “liberation day” tariff plan is illegal.

In the latest twist in the US president’s erratic global trade war, the ruling could unpick border taxes announced early last month. However, the White House has filed a notice of appeal.

What has been announced?

The US Court of International Trade (CIT) ruled that Trump’s use of a sweeping presidential power – the International Emergency Economic Powers Act (IEEPA) – to justify his 2 April tariffs, as well as separate levies imposed on imports from Mexico, Canada and China, was wrong.

Legal complaints about the tariffs had been lodged with the court by the nonpartisan Liberty Justice Center campaign group on behalf of small US businesses, as well as a dozen US states; including Oregon, Arizona and New York.

IEEPA is a 1977 act allowing the president to regulate commerce during a national emergency, without the need to go through Congress, and builds on the Trading With the Enemy Act introduced during the first world war.

However, the three-judge court panel ruled that the economic concerns cited by the White House to justify the tariff plans do not meet the required test of being “unusual and extraordinary threats”.

The judges had been nominated to the court by three presidents: Ronald Reagan, Barack Obama and Trump himself.

What is the impact?

Trump used IEEPA as the basis for his announcement on 2 April of 10% worldwide tariff and country-specific border taxes at higher levels – since paused for 90 days to allow for trade talks – as well as for fentanyl-related tariffs imposed on Canada, Mexico and China.

The White House must take measures within 10 days to remove the tariffs to comply with the ruling, which it is appealing against.

Other targeted tariffs announced by Trump, on steel, aluminium and cars, were imposed under a separate law – section 232 of the 1962 Trade Expansion Act – and therefore remain in place.

Washington’s appeal will presumably go all the way to the supreme court if necessary. Given that the highest legal authority in the US recently ruled in favour of the president in a case involving the dismissal of a senior labour official – analysts are questioning whether the CIT decision could also be overturned.

In the short-term, the judgment will add an extra layer of uncertainty to an already volatile trade situation. Investors have broadly cheered the ruling as a signal that Washington’s tariff policies could be curbed, limiting the hit to global trade and the US economy. Still, additional uncertainty will further dent investor and business confidence.

What does the ruling mean for Trump’s trade deals?

Washington has dialled up and down tariff threats as a tool in trade talks. A powerful court ruling against the president could undermine his push to strike maximum concessions, at a crunch moment in talks with China, Japan, the EU and India.

On Tuesday, Trump had signalled progress with the EU, having a week earlier threatened a 50% tariff on imports from the 27-nation bloc from 1 June, before postponing the plan two days later, to 9 July. Brussels could now, however, scent weakness in the White House approach.

A UK spokesperson said that despite the court ruling, the government would press on with negotiations to conclude the trade deal it sealed on 8 May – the first after Trump’s “reciprocal” tariffs were announced – as no legal text exists to bring into force the concessions Keir Starmer won.

Where does the ruling leave Trump’s economic plans?

At a headline level the ruling is a devastating blow to Trump’s economic agenda, by depriving the self-described “tariff man” of his most powerful, and most favoured, policy tool.

However, there are various legal routes for the president to pursue his cornerstone economic policy. These include section 122 of the Trade Act of 1974, section 232 of the Trade Expansion Act of 1962, and sections 301 and 338 of the Trade Act of 1930. Each grants the president powers to intervene on trade policy, albeit in an often slower and, in some instances, more limited way.

“It sounds like good news, but Trump has various other mechanisms to invoke tariffs or have leverage in trade negotiations. It’s just the speed of their rollout will be weeks/months rather than immediately as he did with the IEEPA,” said Jordan Rochester, an analyst at the Japanese bank Nomura.

Another major focus for investors will be the consequences for Washington’s rising levels of federal borrowing and debt amid mounting concern in financial markets.

Trump had been banking on additional revenues from tariffs to help offset some of his sweeping tax cuts announced last week in his One Big Beautiful Bill Act. The bill, passed last week by the lower house in Congress, could add $5tn (£3.7tn) to US debt levels.

Source: Theguardian

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Olivia Brooks

Economic

Political

Senior Trump administration officials on Thursday downplayed the impact of a U.S. trade court ruling that blocked the most sweeping of President Donald Trump's tariffs, expressing confidence it would be overturned on appeal and insisting there are other legal avenues to employ in the interim.

Financial markets, which have whipsawed wildly in response to every twist and turn in Trump's chaotic trade war, reacted with cautious optimism on Thursday, a day after the U.S. Court of International Trade ruled that Trump overstepped his authority in imposing punitive tariffs on virtually every country in the world.

The Trump administration immediately asked an appeals court to stay the ruling and allow the tariff regime to remain in place. Trump has put tariffs at the center of his effort to extract concessions from U.S. trading partners, including traditional allies such as the European Union.

White House economic adviser Kevin Hassett expressed confidence that the ruling would ultimately be reversed in an interview with Fox Business on Thursday. He also said it would not get in the way of signing new trade deals.

"If there are little hiccups here or there because of decisions that activist judges make, then it shouldn't just concern you at all, and it's certainly not going to affect the negotiations," Hassett said.

White House trade adviser Peter Navarro, a staunch proponent of higher tariffs, told Bloomberg TV that the Trump administration could rely on other laws to implement import taxes if the court's decision remains in place.

Trump had invoked the International Emergency Economic Powers Act (IEEPA), a law intended to address threats during national emergencies, to impose tariffs on almost every U.S. trading partner, raising fears of a global recession. The president temporarily suspended many of the tariffs until early July after markets swooned in response.

The court found that the emergency powers law does not grant Trump the unilateral power to order such sweeping tariffs. Some sector-specific tariffs, such as those Trump has imposed on steel, aluminum and automobiles, were imposed under separate authorities on national security grounds and were unaffected by the ruling.

Canadian Prime Minister Jay Carney welcomed the decision, saying it was "consistent with Canada's longstanding position" that Trump's tariffs were unlawful.

Other U.S. trading partners offered careful responses. The British government said the ruling was a domestic matter for the U.S. administration and noted it was "only the first stage of legal proceedings."

Both Germany and the European Commission said they could not comment on the decision.

MODEST MARKET GAINS

Several analysts said it was preliminary to conclude this closes the door entirely on Trump's sweeping tariffs, with legal paths other than IEEPA likely at his disposal.

"We suspect the administration will lean on other legal authorities to maintain tariff levels around current levels," Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in a note to clients on Thursday.

After prompting an initial surge in stocks in Asia, the ruling stimulated more muted reactions in Europe, where indexes were largely flat, and in the U.S., where gains were modest. The S&P 500 was up about 0.5%, having given back about half of its initial rise at the opening bell.

An early rally in the dollar also fizzled and the greenback was about 0.4% lower against a basket of major trading partner currencies. Bond yields also slipped.

Following a market revolt after his major tariff announcement on April 2, Trump paused most import duties for 90 days and said he would hammer out bilateral deals with trade partners.

But apart from a pact with Britain this month, agreements remain elusive, and the court's suspension of the tariffs may dissuade countries like Japan from rushing into deals, analysts said.

"Assuming that an appeal does not succeed in the next few days, the main win is time to prepare, and also a cap on the breadth of tariffs – which can't exceed 15% for the time being," George Lagarias, chief economist at Forvis Mazars international advisers, said.

Trump's trade war has shaken makers of everything from luxury handbags and sneakers to household appliances and cars as the price of raw materials has risen, supply chains have been disrupted and company strategies redrafted.

Source: Reuters

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Warren Takunda

Economic

Foreign currency hedging is not a topic that usually dominates the water-cooler chats on trading floors. Right now, however, it’s front of mind for many of the biggest players in financial markets. The U.S. dollar’s unusual moves in April, when it fell in tandem with stocks, has cast doubt over a long-lasting relationship between the greenback and risky assets. Over time, it might nudge non-U.S. investors to hedge more or reduce their exposure to American stocks and bonds. Both could create a self-reinforcing downward cycle for the dollar.

Investing abroad is a tricky business for money managers with liabilities denominated in the currency of their home country. Think German or Japanese insurers, whose policies are written in euros and yen, or Canadian and Australian pension funds, whose beneficiaries expect to finance their retirement in Canadian and Aussie dollars. Buying shares and debt issued by companies in other countries introduces the danger that foreign exchange swings will reduce the value of the investments in local-currency terms, even if the underlying returns are good. That is why investors tend to use foreign exchange forwards and other derivatives to hedge currency risks, effectively swapping far-flung exposures into domestic ones.

The beauty of holding U.S. assets, though, is that the dollar tends to strengthen when the market panics. In money-manager speak, it’s an anti-cyclical currency, which means investment bosses can get away with minimal protection against foreign exchange risk on giant portfolios of American stocks and bonds. It also helps that the dollar has generally risen in recent years, providing foreign investors with an extra boost to their overall returns.

One study, published by the National Bureau of Economic Research, found that foreign insurers, pension funds and mutual funds hedged 44%, 35% and 21% of their respective dollar portfolios in 2020, with much higher ratios for bonds compared to stocks. Apply that range to the $30 trillion of total American assets held by non-U.S. investors as of last year, and the implication is that anywhere between $24 trillion and $17 trillion could be unhedged. Why the Dollar’s Wobble Could Be Self-Perpetuating_1

Why the Dollar’s Wobble Could Be Self-Perpetuating_1

Take the Canada Pension Plan Investment Board for example. U.S. dollar exposures account, for more than half of its net investments of $520 billion, but are minimally hedged, according to a person familiar with the portfolio. Several people involved in the running of different Canadian retirement funds told Breakingviews that the safe-haven nature of the greenback was a key reason for relatively low hedge ratios. Japan’s giant Government Pension Investment Fund, meanwhile, had invested almost a third of its $1.7 trillion portfolio in American assets as of March 2024 with slightly more than half in stocks and the rest in bonds. The U.S. exposure was almost entirely unhedged, a person familiar with the matter told Breakingviews.

According to traders and analysts these large so-called “open” positions in U.S. assets have caught the attention of currency market players in recent months, for two reasons. First, the dollar didn’t live up to its safe-haven billing after U.S. President Donald Trump’s tariff plan tanked stocks in early April. The greenback fell roughly 5% against a basket of other rich-world currencies and failed to rebound alongside the S&P 500 Index when trade tensions cooled. The upshot for foreign investors is that volatile U.S. policymaking may cause the dollar to gyrate in the same way as equity markets. If that becomes the norm, foreign investors’ risk models would over time call for much more dollar hedging.

The second consideration is that Trump and his advisers seem set on weakening the currency in a bid to boost exports. That is cementing a sense in foreign currency markets that the dollar is unlikely to see another 2022-style surge in strength, meaning overseas investors may be more likely to get a drag from the greenback rather than a lift.

One open question is whether it is even possible for large pension funds and insurers to meaningfully increase the proportion of their dollar portfolios that are hedged. In places where local institutions’ holdings of U.S. assets are large relative to the local market, such as Taiwan or Nordic countries like Sweden, a big increase in demand for FX derivatives could meaningfully affect the value of the domestic currency. The Taiwan dollar’s recent surge against the greenback looks like a case in point.

Even in deeper markets like the Japanese yen, euro or Canadian dollar, hedging comes at a price. The typical method is to use forward contracts, which involves locking in an exchange rate by agreeing to buy one currency and sell another at a future date. The cost is largely determined by the difference in government bond yields between the two markets. Relatively high U.S. interest rates therefore make it expensive for local investors to hedge their dollar exposure. Why the Dollar’s Wobble Could Be Self-Perpetuating_2

Why the Dollar’s Wobble Could Be Self-Perpetuating_2

One-year contracts currently imply a roughly 2% annual cost for Canadian and European investors and 4% for those in Japan, according to Breakingviews calculations. The implication is that institutions which hedge an extra quarter of their U.S. portfolio could reduce returns by 0.5 percentage points to 1 percentage point, all else being equal. That raises the bar for holding American assets relative to home-country ones.

Why the Dollar’s Wobble Could Be Self-Perpetuating_3

The alternative to extra hedging is for big institutional investors to shrink their exposure to the U.S., for example by investing the marginal euro, yen or loonie elsewhere. Pension managers and insurers generally take months or years to change their investment policies, meaning any shift won’t be immediate. Yet there are signs that both may already be happening in a small way. Traders and investors say the recent slide in the dollar is partly due to extra hedging activity, which mechanically weakens the currency that is being hedged. Meanwhile, non-U.S. participation in a recent 30-year Treasury bond auction was the lowest since 2019, Reuters reported.

The danger, from a dollar holder’s perspective, is that these trends reinforce one another. A weaker and more volatile greenback may inflict losses on foreign owners of U.S. assets, inducing them to sell or hedge more, in turn weakening the currency even further. At some point American assets might look cheap enough for global investors to pile back in – but not before the dollar falls further.

Source: Reuters

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Thomas

Economic

The number of Americans filing new applications for jobless benefits increased more than expected last week and the unemployment rate appeared to have picked up in May, suggesting layoffs were rising as tariffs cloud the economic outlook.

The report from the Labor Department on Thursday showed a surge in applications in Michigan last week, the nation's motor vehicle assembly hub. The number of people collecting unemployment checks in mid-May was the largest in 3-1/2 years. The outlook for the economy is dimming with other data showing a sharp decline in corporate profits in the first quarter.

A U.S. trade court on Wednesday blocked most of Trump's tariffs from going into effect in a sweeping ruling that the president overstepped his authority. Economists said the ruling, while it offered some relief, had added another layer of uncertainty over the economy.

"This is a sign that cracks are starting to form in the economy and that the outlook is deteriorating," said Christopher Rupkey, chief economist at FWDBONDS. "There is nothing great about today's jobless claims data and the jump in layoffs may be a harbinger of worse things to come."

Initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 240,000 for the week ended May 24, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week.

Unadjusted claims increased 10,742 to 212,506 last week, lifted by a 3,329 jump in filings in Michigan. There were also notable increases in applications in Nebraska and California.

Despite the rise in claims, worker hoarding by employers following difficulties finding labor during and after the COVID-19 pandemic continues to underpin the jobs market.

Nonetheless, there has been an uptick in layoffs because of economic uncertainty asTrump's aggressive trade policy makes it challenging for businesses to plan ahead.

A report from the Bank of America Institute noted a sharp rise in higher-income households receiving unemployment benefits between February and April compared to the same period last year. Its analysis of Bank of America deposit accounts also showed notable rises among lower-income as well as middle-income households in April from the same period a year ago.

Economists expect claims in June to break above their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations, following a similar pattern in recent years.

Minutes of the Federal Reserve's May 6-7 policy meeting published on Wednesday showed while policymakers continued to view labor market conditions as broadly in balance, they "assessed that there was a risk that the labor market would weaken in coming months."

They noted that there was "considerable uncertainty" over the job market's outlook, adding "outcomes would depend importantly on the evolution of trade policy as well as other government policies."

The U.S. central bank has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December as officials struggle to estimate the impact of Trump's tariffs, which have raised the prospect of higher inflation and slower economic growth this year.

U.S. stocks opened higher. The dollar eased against a basket of currencies after a brief rally. U.S. Treasury yields fell.

SWELLING UNEMPLOYMENT ROLLS

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.919 million during the week ending May 17, the claims report showed. The elevated so-called continuing claims reflect companies' hesitance to increase headcount because of the economic uncertainty.

Continuing claims covered the period during which the government surveyed households for May's unemployment rate. They increased between the April and May survey periods, suggesting an uptick in the unemployment rate this month. The jobless rate was at 4.2% in April.

Many people who have lost their jobs are experiencing long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.

With profits under pressure, there is probably little incentive for businesses to boost hiring. Mass layoffs are, however, unlikely with a Conference Board survey of chief executive officers released on Thursday showing most captains of business anticipated no change in the size of their workforce over the next year even as about 83% said they expected a recession in the next 12-18 months.

Profits from current production with inventory valuation and capital consumption adjustments dropped $118.1 billion in the first quarter, the Commerce Department's Bureau of Economic Analysis (BEA) said in a separate report. Profits surged $204.7 billion in the October-December quarter.

Companies ranging from airlines and retailers to motor vehicle manufacturers have either withdrawn or refrained from giving financial guidance for 2025, citing the uncertainty caused by the on-again and off-again nature of some duties.

Businesses front-loaded imports and households engaged in pre-emptive buying of goods last quarter to avoid higher costs, making it difficult to get a clear picture of the economy.

The deluge of imports sent gross domestic product declining at a 0.2% annualized rate in the January-March quarter, the BEA said in its second estimate of GDP. The economy was initially estimated to have contracted at a 0.3% pace. It grew at a 2.4% rate in the fourth quarter.

Thomson ReutersUS gross domestic product

Other alternative measures of growth, gross domestic income and gross domestic output also showed the economy contracting at a 0.2% pace in the first quarter.

Source: TradingView

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Adam

Commodity

Natural Gas Holds Steady Ahead of EIA Report as Key Technical Levels Come Into Play

Daily Natural Gas

Natural gas prices remained flat Thursday, with traders holding their positions ahead of the U.S. Energy Information Administration (EIA) weekly storage report due at 14:30 GMT.

The market is sitting just above its 200-day moving average at $3.534, a level that has consistently offered support since late April. Traders are closely watching this level for signs of trend confirmation or potential breakdown, especially with nearby contracts showing signs of weakness.

Can the 200-Day Moving Average Continue to Provide Support?

Price action is hovering near a critical technical inflection. The 200-day moving average has held firm in recent weeks, fending off declines near $3.381 and $3.444. A decisive break below this threshold could raise red flags for bulls, but may not necessarily trigger broad selling, given the potential for weather-driven short-covering rallies.

Upside momentum remains capped by the 50-day moving average at $4.000, forming a well-defined range that traders will look to fade or break depending on today’s EIA outcome.

Will the EIA Storage Report Confirm Supply Tightening?

Consensus expectations for the upcoming EIA report point to a 93 Bcf injection, down from the prior week’s 98 Bcf and modestly reducing the surplus over the five-year average to 85 Bcf. While not overly bullish, this gradual reduction may support prices if followed by stronger power burns or cooling demand.

Analysts, including Ritterbusch, are cautioning against reading too much into short-term weather patterns, stressing that despite a likely continued storage surplus, there’s little risk of a supply glut developing in the near term.

How Are Weather Patterns Influencing Demand Forecasts?

Short-term demand remains weak due to a mild national pattern, with showers and cooler temperatures suppressing consumption in the eastern half of the U.S. through early June. Texas and the South are also seeing reduced highs in the 70s and 80s, further dampening near-term power demand.

However, NatGasWeather notes that a hotter trend is likely to emerge during the June 4–9 window, with highs in the 80s and 90s spreading across the East. This could revive cooling-related demand and lend support to the July contract.

Market Outlook: Neutral to Slightly Bullish if Heat Builds

In the near term, the market remains rangebound but leans slightly bullish if the June heat forecast verifies and today’s storage report aligns with or undershoots expectations. The $3.534 support level will be key—holding above it reinforces stability, while a move lower invites volatility.

With July gas last trading at $3.57 and weather risks shifting warmer, traders should prepare for upside tests, especially if cooling demand firms into early June.

Source: fxempire

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Olivia Brooks

Economic

The second release of first quarter real GDP growth was left broadly unchanged, showing a very modest contraction of 0.2% quarter-over-quarter annualized (previously -0.3%) – a tenth below the consensus forecast. Recall, this is a notable deceleration from the 2.9% annualized rate of expansion averaged over the prior two quarters and is the first quarterly contraction in three-years.

The slight upward revision to GDP reflected stronger investment which was partially offset by a downgrade to consumer spending.

Consumer spending rose 1.2% (previously 1.8%), or roughly a third of the rate of expansion in the prior quarter. The downgrade was largely due to softer services spending (2.2% from 2.7%).

Non-residential fixed investment rose 10.4% (previously 9.8%), with a surge in equipment spending (24.7%) accounting for the bulk of the gain – reflecting companies ramping up purchases ahead of the tariffs. Investment in intellectual property products (+4.6%) was also healthy, rising at the fastest annualized pace in a year.

Residential investment was revised to a small contraction of 0.6% (previously +1.3%).

The bulk of the pullback in GDP came from net exports. Imports surged by 42.6%, largely owing to a strong gain in goods imports (53.3%). Meanwhile, exports rose by a more modest 2.4%, resulting in net trade subtracting 4.9 percentage points (pp) from headline growth. Roughly half of the uptick in imports showed up in inventory investment, which added 2.6pp to Q1 GDP.

Government spending contracted by 0.7%, as outlays from both federal defense (-7.1%) and non-defense (-1.2%) declined.

Final sales to private domestic purchasers – the best gauge of underlying domestic activity – expanded by a healthy 2.5%.

Real Gross Domestic Income (GDI) also contracted by 0.2% in the first quarter. Corporate profits fell 11.3% annualized or $118 billion after accounting for inventory valuation and capital consumption adjustments. However, this was partially offset by another solid gain in employee compensation (5.4%), which accounts for roughly two-thirds of total national income.

Key Implications

The second estimate of first quarter real GDP did not change the underlying narrative. Economic growth was heavily weighed down by a surge in import activity, as businesses scrambled to pull forward purchases ahead of the tariffs. Looking through the import shock, underlying domestic demand remained reasonably healthy, but this too likely captures behavior shifts related to tariffs in investment and consumer purchases, such as autos.

As of May 28th, the U.S. Court of International Trade struck down all of President Trump’s tariffs related to the International Emergency Economic Powers Act, including the Canada/Mexico/China fentanyl tariffs, the universal 10% tariffs currently in effect and the delayed reciprocal tariffs that were slated to come back into effect as of July 9th. The court ruling has no impact on sectoral tariffs, including the steel & aluminum and auto related tariffs. While the administration has already said that they plan to appeal the ruling, timelines remain unclear. At the very least, yesterday’s announcement weakens the U.S. position in trade talks that were underway with more than a dozen nations, most notably the EU and China.

Of the Q2 data released, there’s only moderate evidence that domestic spending has slowed in response to heightened trade uncertainty. But the pullback in Q1 corporate profits – the largest quarterly decline since Q4’2020 – is a warning sign that firms were coming under pressure, and this was before the bulk of the tariffs had even come into effect. Tomorrow’s release of the April personal income and spending will provide a more fulsome snapshot of how the consumer fared last month, and whether there’s any evidence of a softening in discretionary spending trends.

Source: ACTIONFOREX

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Adam

Commodity

China–U.S. Trade War

Oil prices rose on Thursday after a U.S. court blocked most of President Donald Trump's tariffs, while the market was watching out for potential new U.S. sanctions curbing Russian crude flows and an OPEC+ decision on hiking output in July.

Brent crude futures were up 19 cents, or 0.3%, to $65.09 a barrel at 1215 GMT. U.S. West Texas Intermediate crude was up 24 cents, or 0.4%, to $62.08 a barrel.

A U.S. trade court on Wednesday ruled that Trump overstepped his authority by imposing across-the-board duties on imports from U.S. trading partners. The court was not asked to address some industry-specific tariffs Trump has issued on automobiles, steel and aluminium using a different statute.

"Markets are positive since Donald Trump got the setbacks on the tariffs," said Bjarne Schieldrop, chief commodities analyst at SEB. "That's less headwind for the global economy, so more demand for oil because the machine of the global economy moves better and faster."

The ruling buoyed risk appetite across global markets, which have been on edge over the impact of the levies on economic growth, but some analysts said the relief may only be temporary given the Trump administration has said it will appeal.

"But for now, investors get a breather from the economic uncertainty they love to loathe," said Matt Simpson, an analyst at City Index in Brisbane.

On the oil supply front, there are concerns about potential new sanctions on Russian crude. At the same time, the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, could agree on Saturday to accelerate oil production hikes in July.

"We're assuming the group will agree on another large supply increase of 411,000 barrels per day. We expect similar increases through until the end of the third quarter, as the group increases its focus on defending market share," ING analysts said in a note.

Adding to supply risks, Chevron (CVX.N) , opens new tab has terminated its oil production and a number of other activities in Venezuela, after its key license was revoked by the Trump administration in March.

Venezuela in April cancelled cargoes scheduled to Chevron, citing payment uncertainties related to U.S. sanctions. Chevron was exporting 290,000 barrels per day of Venezuelan oil, or over a third of the country's total, before that.

"From May through August, the data points to a constructive, bullish bias with liquids demand set to outpace supply," Mukesh Sahdev, global head of commodity markets at Rystad Energy, said in a note, expecting demand growth to outpace supply growth by 600,000 to 700,000 bpd.

Later on Thursday, investors will be watching for the weekly reports from the American Petroleum Institute and the Energy Information Administration, the statistical arm of the U.S. Department of Energy.

According to market sources familiar with the API data, U.S. crude and gasoline stocks fell last week while distillate inventories rose.

Meanwhile, a wildfire in the Canadian province of Alberta has forced residents of a small town to evacuate and prompted a temporary shutdown of some oil and gas production, which could reduce supply.